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December 1998
Volume 25
Number 6

RETAILER & TOBACCO INDUSTRY NEWS (cont.)

Consolidated Cigar Corp. Sues Dominican Cigar Manufacturer over Montecristo Infringement
Consolidated Cigar Corp. has filed a motion of summary judgment against Monte Cristi de Tabacos CXA, accusing the Dominican company of counterfeiting its Montecristo brand cigars. The motion, filed in the Southern District Court of New York, also contends that Monte Cristi is "persistently and aggressively peddling" its counterfeit cigars in the U.S. Consolidated Cigar is seeking $3 million in damages, plus reimbursement of its legal and attorney fees.

In the mid-1970s, Consolidated Cigar obtained the rights to the Montecristo trademark in the U.S. from the marque's original Cuban owners, Menendez and Garcia. Consolidated claims it has knowledge of more than 140 importers, distributors, and resellers that have trafficked in Monte Cristi's Montecristos in the U.S. Monte Cristi's cigars feature a band design that looks like an amalgam of Consolidated's Montecristo and the original Cuban version. The company's cigar boxes also look very similar to Consolidated's Montecristo boxes and are clearly marked "Monte Cristi de Tobacos, Rep. Dom."

The motion asserts that: Monte Cristi executives sold cigars to customers in the U.S. with full knowledge that the buyers intended to resell them on the U.S. market; encouraged the creation of a distributorship for the cigars in the Bronx, N.Y.; shipped large quantities of cigars directly to the United States; misled importers who questioned whether the cigars could be legally sold in the U.S.; and supplied letters of authenticity to customers as a way to convince U.S. Customs officials that seized shipments of Monte Cristi's Montecristos should be allowed into the country.

Julio Perez Gonzalez, owner of Monte Cristi de Tabacos, filed a statement with the court in September denying the fact that his company tried to enter the U.S. market with their cigars. He maintains that his company sells its cigars only in the Dominican Republic, where he claims ownership of the Montecristo trademark. That claim is the subject of a separate lawsuit that Consolidated and Monte Cristi are battling over in the Dominican courts.

As of October, Consolidated's motion for summary judgment in New York was still pending. The company was unsure when a ruling would be handed down.

Ultimate Cigar Co. Acquires Cigar Cos.
Vancouver-based Ultimate Cigar Company has completed the acquisition of three cigar companies - Pico Cigars Ltd., DSI Limited, and American Western Cigar Co. The three acquisitions significantly expand the company's product base, production capacity, and market share. Ultimate Cigar's focus is now to expand operations in the U.S.

Canadian cigar distributor Pico Cigars Ltd. was acquired for two million restricted treasury shares. DSI Limited, a Nassau-based importer, and American Western Cigar Company, a Cincinnati-based distributor, were acquired for a total of 1.5 million restricted shares and $500,000, to be paid over three years. DSI Limited has an exclusive supply contract for North America with Taru Martani, an Indonesian cigar manufacturer.

In addition, the company has appointed Alfred J. Berger, Jr., president of DSI Limited and American Western Cigar Company, to its Board of Directors. In his 40 years in the cigar industry, Berger has served as vice president of John Berger & Son Co. and as president and director of Marsh & Son Co., the oldest cigar company in the U.S.


Former Employees Sue Vegas Cigar Cos.
Two Las Vegas cigar makers are facing allegations that they did not pay a number of workers minimum wage or overtime over a three-year period. In September, eleven men sued Las Vegas Cigar Co. and four men sued Don Pablo Cigar Co. in U.S. District Court. The workers held various positions in receiving, sorting, cutting, or rolling tobacco. Both Robert Schear, owner of Don Pablo, and Richard Galdieri, owner of Las Vegas Cigar, deny the accusations, claiming they pay workers better than minimum wage. "I start people out at $6.50 an hour," said Galdieri. Both men say cigar makers are not paid by the hour but by the cigar. The calculation varies depending on the sizes of the cigars the company makes. More experienced rollers earn a better rate, said Galdieri. "That's the way cigar makers have been paid for 200 years," he added. "There wasn't one cigar maker here that was making under $700 a week."

Cigar makers tend to come and go, as their income is based on piece work. Galdieri said there may even be former employees to whom he owes money and he would pay them.

Cigar makers were in high demand and jobs were plentiful at the height of the premium cigar boom, but business conditions have since forced Galdieri to let many people go. He believes this may be at the root of the lawsuit.


FDA's First Woman Commissioner Named
In October, New Mexico cancer specialist Dr. Jane Henney was confirmed as commissioner of the Food and Drug Administration. Henney, the first woman commissioner of the FDA, succeeds Dr. David Kessler, who left the post last year to become dean of Yale University Medical School.

Henney, 51, is vice president of the University of New Mexico's Health Sciences Center. At New Mexico, she supervises a medical school, a college of pharmacy, and several teaching hospitals. Henney is also president of the United States Pharmacopoeia, a non-profit organization that sets drug purity and quality standards.

A 1973 graduate of Indiana University's medical school, she became a senior investigator at the National Cancer Institute by 1977. Henney eventually went on to serve as NCI's deputy director and, in the late 1980s, was head of the University of Kansas medical school. From 1992 to 1994, she served as Kessler's deputy at the FDA.

In a statement issued by the White House, President Clinton said, "The nation now has an FDA commissioner who is committed to assuring that Americans have safe food, safe and effective drugs and medical devices, and improved public health."


International aid came pouring into Honduras and Nicaragua, two of the hardest-hit Central American nations battered by Hurricane Mitch in late October. Swollen rivers and mudslides continued to wreak havoc well into November, as the paralyzed nations began to pick up the pieces and assess the damage.

Many cigar companies quickly establishing relief funds as word of the storm's devastating aftermath became known. Medical supplies, food, and other basic necessities were collected and shipped once airports began to reopen.

But a clear picture of the storm's impact was slow to emerge, due to widespread loss of telephone lines and electric service. And initial relief efforts were hampered by severe damage to roads, bridges, and aerial runways. In Honduras, 78 bridges were destroyed, leaving many sections of the country inaccessible by land.

Most cigar manufacturers sustained relatively little direct damage to their facilities. "Fortunately, the damages to our installations have been minimal," said Fernando Alvarez, vice president, marketing, of Inter-Continental Cigar Corp. "But the areas of Danli in Honduras and Esteli in Nicaragua, where we are located, were hit very hard." Both the Honduran capital of Tegucigalpa and the Nicaraguan capital of Managua sustained considerable damage. One notable exception was a tobacco farm belonging to Padron Cigars.

Among cigar producers, concern over the immediate or lasting effects of the storm on cigar production or exports was directed towards the massive hardship imparted on the nations' residents.

"The loss of lives and property are tremendous, and we feel obliged to help these people in any way we can," Alvarez added. The Carlos Torano family described the toll on Nicaragua's citizens as "nothing less than devastating."

"Those who survived are desperately in need of food, clothing, drinking water, and medical supplies," said Barbara Yanes-Henry, general manager of Caribe Imported Cigars, which has organized a disaster relief effort with Tabacos Ranchos Jamastran.

"We have enjoyed Honduran cigars for a reasonable price the past few years," said Dave Wedenmiller, president of Wide West Imports. "The people there work for a few dollars a day. The least we can do is help get them back on their feet." On November 5, Wedenmiller began making weekly flights to personally bring medical supplies into Honduras.

Nick Perdomo, president of Nick's Cigars, said that many of the supplies collected in the U.S. had begun to stack up at the Miami Airport by December, because shipping companies were no longer donating their services to transport relief supplies. Money for freight charges had become the first necessity.

Despite promises of billions of dollars worth of international aid, the news continues to worsen in both nations. A health emergency was declared on November 20 in much of northern Nicaragua, as fears of disease surged. The announcement came a day after the director of the Pan American Heath Organization warned that the situation in Central America was "grave." On December 4, Honduras declared a national state of alert because of epidemics. Officials said the most serious health problems were malaria, diarrhea, cholera and leptospirosis, known as "swamp fever."

"The epidemics are already in the country, and we have to take them on with the few resources we have," said Honduran Public Health Minister Marco Antonio Rosa. "The epidemics have sprung up because many cities were under water and mud, which caused rats and other animals to come out of their hiding places and into the streets."

Doctors and relief organizations from the United States, Cuba, Japan, France, and numerous other nations have traveled to the region to help the impoverished nations cope. Due to a lack of heavy machinery, many neighborhoods remain covered by mud. The armies and about 300,000 college students continue to clean out houses by hand.

In all, Mitch's rampage delivered a devastating blow to the economies of Central American nations, which were just beginning to thrive after the region's civil wars of the 1980s. Hugo Noe-Pino, the Honduran ambassador to the United Nations, estimates that 70 percent of the nation's economic output has been lost. Development efforts were put back at least 30 years, he said. "This is Honduras' worst disaster in more than 100 years," said Billy Handal, one of the country's three vice presidents.

At its peak, Mitch was a rare category 5 hurricane, with sustained winds reaching 180 mph. Flood waters destroyed more than 200,000 homes, leaving more than one million Honduran residents homeless; over three million were left homeless throughout the region. Mitch killed 5,657 people in Honduras, and the death toll throughout Central America is more than 9,000. Rebuilding could cost upwards of $4 billion.


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